Swiss banks, which are known for their secrecy and stability, are once again investing more in the global markets as they see signs of economic recovery from the pandemic. The Swiss banking sector, which accounts for about 6% of the country’s GDP, has been resilient during the crisis and has benefited from the strong performance of its wealth management and asset management businesses.
Swiss banks report strong results in the first half of 2023
According to the Swiss Bankers Association (SBA), the Swiss banking sector reported a net profit of 14.7 billion francs ($16 billion) in the first half of 2023, up by 23% from the same period last year. The SBA said that the increase was mainly driven by higher income from trading and commissions, as well as lower provisions for credit losses.
The SBA also said that the Swiss banks increased their lending activities by 2.4% to 1.2 trillion francs ($1.3 trillion), while their assets under management grew by 5.5% to 8.9 trillion francs ($9.7 trillion). The SBA attributed the growth to the positive market developments, the inflow of new money, and the appreciation of the Swiss franc against other currencies.
The SBA said that the Swiss banks were well capitalized and had sufficient liquidity to cope with any potential shocks. The SBA added that the Swiss banks were committed to supporting the economic recovery and the transition to a more sustainable and digital economy.
Swiss banks expand their presence and activities abroad
As part of their growth strategy, some of the leading Swiss banks have been expanding their presence and activities abroad, especially in emerging markets where they see high demand for their services. For example, UBS, the largest Swiss bank, announced in July that it would invest $400 million over the next five years to boost its wealth management business in China, where it already has a majority stake in a joint venture with a local partner.
Similarly, Credit Suisse, the second-largest Swiss bank, said in August that it would increase its stake in its securities joint venture in China from 51% to 100%, becoming the first foreign bank to do so. Credit Suisse also said that it would open a new branch in Saudi Arabia, where it obtained a full banking license earlier this year.
Meanwhile, Julius Baer, one of the leading private banks in Switzerland, said in June that it would acquire a majority stake in Reliance Group, a leading wealth manager in Brazil. Julius Baer also said that it would launch a new digital platform for its clients in Asia, where it has been growing rapidly in recent years.
Swiss banks face challenges and opportunities in the post-pandemic era
Despite their strong performance and expansion plans, Swiss banks also face some challenges and opportunities in the post-pandemic era. One of the main challenges is the increasing regulatory pressure from both domestic and foreign authorities, who are demanding more transparency and compliance from the Swiss banks.
For instance, in February, Switzerland was at risk of being blacklisted by the European Union after a huge leak of Credit Suisse banking data revealed that some of its clients had evaded taxes and laundered money through offshore accounts. The leak prompted an investigation by several European countries and raised questions about Switzerland’s role as a financial hub.
Another challenge is the rising competition from other financial centers and players, such as Singapore, Hong Kong, London, New York, and fintech firms, who are offering similar or better services at lower costs or with more innovation. The Swiss banks have to constantly adapt and differentiate themselves to maintain their edge and attract new customers.
On the other hand, one of the main opportunities for Swiss banks is the growing demand for sustainable finance, which refers to investing in projects or companies that have positive environmental, social, or governance (ESG) impacts. According to a report by PwC, Switzerland is one of the leading countries in sustainable finance, with about 40% of its assets under management being ESG-related.
Another opportunity is the digital transformation of the banking sector, which involves using new technologies such as artificial intelligence, blockchain, cloud computing, and big data to improve efficiency, customer experience, security, and innovation. The Swiss banks have been investing heavily in digitalization and have launched various initiatives and partnerships to enhance their digital capabilities.
